The Post's editorial {"Costa Rican Peace Plan Fades," June 16} lamenting the latest setback to attempts to negotiate a peace agreement in Central America is inaccurate and muddled. Rather than providing excuses for the Reagan administration's totally hypocritical policy, The Post should be praising Costa Rican president Oscar Arias' peace plan and helping the reader understand its provisions.

The Post is just plain wrong when it faults the Arias plan for lack of "simultaneity." The plan calls for a suspension of military aid to armed insurgent groups (including the contras) when all five Central American presidents sign the agreement. Simultaneously, each country, including Nicaragua, must grant amnesty to all political prisoners, begin an internal dialogue and provide for full political party freedoms in a democratization process that must be completed in 60 days. The Sandinistas would have to allow opposition newspapers, including La Prensa, to resume publication without censorship, allow radio and television stations to broadcast without interference and guarantee the right of all political parties to organize freely, all within two months of signature. Moreover, the Sandinistas would be committing themselves to hold internationally supervised elections.

To make sure all parties are abiding by the agreement's provisions, the plan sets up a Compliance Committee composed of the heads of the U.N. and the OAS and the foreign ministers of the Contadora and Support Group countries. Of course, an additional check on compliance would be coverage by The Post's own correspondents in Central America, who could easily verify whether or not newspapers were being censored or whether political parties were able to organize free of government harassment.

All the plan asks of the United States is the suspension of military aid to the contras for 60 days. And what if Nicaragua reneges? The United States could then resume military aid to the contras, who, after all, managed to hang on for almost two years without official U.S. government support.

It sounds like an astonishingly good deal for the United States, yet President Reagan attacks the plan for being too lenient toward Nicaragua. In the Reagan administration's tortured lexicon, "simultaneity" means Nicaragua must make all its concessions first, before aid to the contras is halted, an approach The Post seems to endorse.

By now it should be obvious that the Reagan administration is not interested in a negotiated settlement in Central America, but is merely paying lip service to negotiations in order to get more contra aid from Congress. Indeed, the administration's greatest fear is that the five war-weary Central American presidents will sign a peace agreement!

To guarantee an agreement is never signed, the administration is putting intense pressure on President Arias to force him to make "improvements" in his peace plan, improvements that would make it absolutely certain that Nicaragua would reject the plan. President Arias has stood firm. In fact, before this week's regional summit meeting in Guatemala was postponed at El Salvador's request, it appeared that the presidents of Costa Rica, Guatemala and Nicaragua and possibly even Honduras were all ready to sign. Obviously such a meeting would have been a diplomatic disaster for the Reagan administration; therefore it should have been anticipated that aid-dependent El Salvador would pull out at the last minute.

The Central American presidents are now scheduled to meet in August to discuss the Arias plan. Whether or not a peace agreement is signed, however, will depend on a sixth president, Ronald Reagan.

The Arias plan provides the basis for the restoration of peace to a region of the world devastated by seven years of war. The plan would protect legitimate U.S. economic and security interests and would move Nicaragua -- and its neighbors -- along a democratic path.

If the Reagan administration is really worried about Nicaragua becoming a strategic threat, it should stop meddling and allow our Latin neighbors to settle their differences peacefully. -- William Goodfellow The writer is director of the Center for International Policy, a Washington-based research project of the Fund for Peace.